A groundswell of protest over the Legislature's imposition of the 6 percent sales tax to a list of services, from business service centers to janitors, could prompt recall efforts against a number of lawmakers. Ballot proposals also are in the offing to ban service taxes and, perhaps, even write a graduated income tax into the state constitution.

The services tax is expected to raise $750 million annually after it goes into effect Dec. 1. It was part of a last-minute budget agreement to patch a $1.75 billion hole in the state's fiscal 2008 budget. State government shut down for several hours in the wee hours of Oct. 1 before the compromise was passed by the Legislature and signed by the governor.

Among taxation alternatives posed recently to National Federation of Independent Business members, "Of all the options the tax on sales was the most repugnant," reported Michigan NFIB chapter director Charles Owens.

The service tax represents a potential cascade of tax pain for small businesses, he said, "if you start thinking about all the services a business uses. And then there's the part where if the company in question has to charge customers 6 percent, they're getting hit initially ... and then they've got to go face their customers."

A broad coalition of business groups -- landscapers, private investigators and others affected by the new tax -- met in Lansing Tuesday to form a consensus on how to approach repeal. The Small Business Association of Michigan, which called the meeting, is pushing for a two-pronged approach, lobbyist Todd Anderson said.

The most immediate option is to persuade legislators to simply repeal the service tax, he said, but he conceded it wouldn't be a likely event at this point. A parallel approach will involve a ballot initiative, he said.

"Certainly we'll start with repeal, but it might be an outright ban. We might even go to the constitution," Anderson said.

Anderson discounted the likelihood of placing a graduated income tax into the state constitution, as some critics have suggested. "I don't see any scenario that it would involve revenue generation."

The down side of that approach is that the earliest a ballot question could appear statewide would be November 2008, he said.

Some lawmakers already are expressing remorse, he said, and several in conservative districts are expected to be targeted for recall by anti-tax activists.

House Speaker Andy Dillon (D-Redford Township) said he isn't opposed to changing the tax, and proposed the alternative of hiking the sales tax to 7 percent in exchange for dropping the service tax.

Part of the difficulty with the new tax comes from uncertainty over the services to which it will apply.

"It was a very political process -- people in a room picking which services got taxed and which didn't," Anderson said.

One category slated for taxation is financial planning. Dimitroff's company might be exempt, however, because she is licensed to execute trades.

Action in Lansing earlier this month to approve the new levy even made waves among her peers outside of Michigan, Dimitroff said, having been described by the governor's ofice as a sort of luxury tax.

"It's hard to imagine financial planning is a luxury. Helping people accomplish their goals to be secure, to be able to live throughout their lifetimes without running out of money is a luxury? In that sense it seems very misguided," she said.

Close on the heels of a minimum wage increase and a personal income tax hike, a new tax on services is the last thing payroll services provider Monty Wilson wanted to deal with, he said.

It isn't clear the new services tax applies to his company, Payroll Plus, but even if it doesn't, it certainly will impact his customers.

"Most of them are struggling to keep their heads above the water as it is," he said.
One customer faces a $60,000 hit on a recent million-dollar contract, the Plainwell businessman said, eating away whatever margin his customer might have expected.

Business organizations have kept busy the last week or so taking calls and e-mails from confused and concerned members, many seeking clarification about whether they would be included as a service requiring collection of the new tax.